Venture capital funding is not equivalent to a clinical impact. While hospital leaders place a clear premium on seamless systems integration, they care little for what their prospective patient's startup valuation is at a billion dollars. In fact, the marketplace is inundated with products that claim to revolutionize patient care.
However, the true leaders of this market are defined by their regulatory clearance status, workflow-fit capabilities, and proven economic benefit.
This article strips away the noise related to the above and maps out which software, infrastructure, and artificial intelligence health tech companies dominate the healthcare vertical.
What Hospitals Actually Need from Health Tech Companies
Typical vendor lists contain a mix of medical device manufacturers, consumer apps, and pharmaceutical companies. A legitimate health technology organization creates software, builds out a data infrastructure, connects hardware, or enables care networks digitally with providers; they do not offer more silos.
To be successful, these types of vendors require immediate workflow alignment.
A vendor's product is functionally useless to an enterprise customer if it will not integrate with an existing billing system or allow secure intercompany data exchange. While there are exceptions, pricing models in this space are rarely public.
Most pricing models are quasi-identical to a per-member-per-month (PMPM) model for the care networks they define, per provider licensing, or on a per-episode basis; some vendors use shared savings agreements. Therefore, success is based solely on three criteria: workflow fit without added administrative hours, regulatory clarity, and demonstrated clinical or economic outcomes. Anything else is marketing.
Basic Software and Data Platforms
Healthcare cannot function today without data routing, compliance checks, and clinical trial management system (CTMS) software. This layer is the foundation of the healthcare market.
1. Veeva Systems
Veeva has become the default cloud-based software supplier for the pharmaceutical and biotechnology sectors.
Veeva Systems is a data management company that provides clinical, regulatory, and commercial data services for large corporations. The company has a current market cap of $46.6 billion, which gives them a structural dominance.
Switching out Veeva is not easy for any life sciences organization after it is fully integrated. There are significant costs associated with replacing the company, and the operational risks of changing data systems during a clinical trial will be deemed too great by most manufacturers in the pharma sector. The company's unique pricing practices are confidential and enterprise-oriented.
2. InterSystems
InterSystems is a legacy company, operating for over 45 years with approximately 2,100 employees worldwide. InterSystems provides data management and interoperability solutions that help run critical hospital systems. Instead of building consumer-oriented apps, they provide organizations with the infrastructure necessary to securely transport clinical data from one location to another.
As a result, implementing InterSystems requires extensive technical mapping, and their pricing is reflective of the extremely high degree of complexity associated with enterprise-level data architecture.
3. Datavant
Datavant is dedicated to preserving patient privacy through the development of a connectivity layer that enables hospitals, payers, and researchers to share patient data while remaining compliant with privacy legislation and not disclosing the identities of their patients.
Datavant is considered a private equity growth company by PitchBook and has significant institutional clientele who have come to rely on their technology infrastructure. When merging datasets to examine population data, healthcare networks utilize Datavant's technology to remove personal health information by default.
4. Inovalon Holdings
Inovalon Holdings provides analytics and performance improvement services for both payers and providers. They hold value because they help insurance companies and healthcare networks understand all of their target populations.
Pricing is completely custom. Customers use the platform to identify care gaps through diagnostics and risk management, and to determine whether clinical outcomes align with financial realities. Through millions of patient records, Inovalon helps insurers understand where they are losing money and where patients have not received critical preventive care.
Billing and Payment Health Tech Companies
Healthcare billing is broken, complex, and manual. Companies that solve the revenue cycle greatly impact a hospital's survival.
1. Waystar
Waystar is a highly efficient machine in the healthcare payments sector. According to current data, Waystar is the software used by over 60% of the U.S. hospital patient population and by more than one million providers.
Waystar automates claims, manages the revenue cycle, and reduces the time it takes for insurers to process claim payments within the system. With approximately 1,757 employees, it targets very large hospital systems. Pricing for enterprise customers varies by company and is usually based on processing volume and debt recovery rates.
2. R1 RCM
R1 RCM manages all financial operations for hospitals and provider organizations. R1 RCM manages the revenue cycle from start to finish.
This is not just a simple software subscription but a large-scale operational partnership. In this regard, the buyer is the hospital finance director. Hospitals want to prevent asset leakage and reduce the workforce needed to perform claim recovery. More generally, R1 RCM's clients seek revenue mechanisms through shared revenue or performance-based contracts.
3. AKASA
AKASA solves the revenue cycle problem in the same way, but it emphasizes AI technology. The company's workforce consists of about 110 team members that use technology to alleviate the tedious administrative duties currently burdensome to hospitals' billing departments.
Unlike other companies that charge based on services provided, this company places a premium value on financial outcomes for hospitals. When the client successfully processes a claim without any manual intervention using their software, immediate value is demonstrated. This allows hospitals to reallocate their billing staff into the more complex claims denial process, where higher revenue can be achieved, rather than performing basic entry of claim data.
4. Cedar
Whereas the companies above are focused on the backend of the billing process, Cedar focuses on the consumer experience by developing a consumer-friendly billing and payment platform for patients.
Hospitals contract with Cedar to help them resolve unpaid claim issues resulting from the use of confusing medical bill formats. Cedar is offering hospitals an improved means for paying claims via mobile devices, which ultimately results in improved collections for hospitals. Cedar determines its contract prices for hospitals and customers based on their size and the volume of patient transaction activity.
Patient Data and Artificial Intelligence
The application of artificial intelligence (AI) within the healthcare sector is much more than simply writing "how to" emails. AI is used for molecular data analysis, disease stage tracking, and identifying commercial opportunities within healthcare.
1. Tempus AI
Tempus AI utilizes clinical and molecular data for focused medical care delivery through precision medicine for cancer patients. Currently valued at approximately $13.2 billion, Tempus markets its platform to health systems, oncologists, and the life science sector.
Using machine learning, Tempus takes an enormous amount of patient data and utilizes it to make recommendations regarding targeted therapies for cancer patients. The Tempus AI business model is based on deep, customizable pricing contracts with major research institutions.
2. Komodo Health
With the help of their records and statistical tools, these health tech companies are in a position to be able to create a large database of patients' encounter history within the United States. The biggest advantage to Komodo Health is they provide patients across the United States with a comprehensive view of the types of diseases that are present in their area, as well as the best treatment options available to patients.
These large databases have been created through the efforts of these businesses, and pharmaceutical companies will be able to make informed decisions about where to launch their new products based on data that Komodo Health has given to them through these databases. Prices for this data will be set based on how many companies are purchasing it on an enterprise-level basis.
3. AcuityMD
In addition to focusing on the medical device market, this company also tracks where medical devices are sold, who uses them, and how much market capacity each medical device has within the market. Their customers range from individual entrepreneurs to multi-billion dollar enterprises.
The information provided by AcuityMD enables medical device manufacturers and medical device sales teams to target the most appropriate surgeons in order to maximize their use of medical devices.
Medical Testing and Disease Detection
Software that reads medical imaging or detects cancer operates under intense regulatory pressure and requires rigorous clinical validation before entering the market.
1. GRAIL
Along with many other medical technology companies, GRAIL is under pressure from regulatory agencies to develop new software applications. Their software applications are validated through rigorous clinical testing.
They have become one of the industry's leading companies through the development of novel technology that utilizes artificial intelligence (AI) to detect and analyze cancerous tissue. This market has clinical and commercial aspects that differ from country to country concerning pricing and reimbursement pathways. There is an extremely high barrier to entry into this market.
2. Qure.ai
Qure.ai is using deep learning in diagnostic imaging. They train software that can analyze scans and x-rays looking for tuberculosis, cancer, and other diseases within milliseconds after examination.
Hospitals and public health organizations are purchasing this technology to help speed up the analysis of scan and x-ray images in their radiology departments by producing clinical evidence and gaining regulatory clearance, thus enabling the software to be used safely by healthcare professionals. It also allows healthcare providers to prioritize patients needing urgent care by providing them with an alert of any abnormal findings from their scans.
3. Viz.ai
Viz.ai helps coordinate the treatment of patients with time-sensitive emergencies such as strokes. When a scan indicates that a patient may be having a stroke, Viz's platform will notify everyone involved in the patient's care via their mobile devices.
This allows for a much quicker response time between diagnosis and surgery. Hospitals purchase this software to improve patient survival rates and decrease the costs associated with long-term care. Although there are custom pricing options, hospitals can clearly show ROI based on the reduction of hospital stays and disability rates of their patients.
Online Care and Doctor Networks
When it comes to connecting patients with their providers, the systems to schedule, network, and access virtual care have been difficult to develop, resulting in many barriers to getting patients to their providers.
1. Doximity
Doximity is a social network for doctors. It is widely considered as the dominant network for doctors, with claims of more than $450 million in yearly revenue and 93% of revenue generated from enterprise subscriptions.
Doctors are able to sign up and use Doximity to connect with other doctors, manage workflow, and collaborate with one another without having to spend any money.
However, to reach the doctors, hospitals and pharmaceutical companies have to pay a huge amount of money to get access to the Doximity platform. It is a highly effective closed-door commercial channel that completely bypasses traditional advertising.
2. Zocdoc
Zocdoc is primarily a patient discovery and online booking site. Millions of patients use Zocdoc every month to search for local doctors that accept their specific insurance plans.
Zocdoc has approximately 900 employees and earns revenue from healthcare providers, although provider pricing will vary significantly based on local market conditions and medical specialty. In urban markets, where competition is extremely high, many doctors pay Zocdoc to list their practices, as Zocdoc is the primary means for them to acquire new patients. Zocdoc's model promotes patient access to healthcare while providing value to providers by helping them build their practices in a highly competitive market.
3. Headway
Headway is a provider of mental health services in the U.S. that addresses the insurance barrier to patient access to mental health care.
Headway employs approximately 819 people and has created a software platform to help independent providers of mental health services accept insurance payments easily.
Patients find care through the Headway platform, therapists receive payment for their services, and health plans can expand their networks of mental health providers. Headway has created a pricing model that is based on care delivery and negotiated agreements with providers rather than a flat fee for using its software systems. By performing all of the administrative tasks associated with providing care, Headway has reduced the administrative burden that many providers face and eliminated the barriers that most independent providers of mental health services face to accepting insurance payments.
4. PointClickCare
PointClickCare is a provider of health information technology solutions to the long-term care and post-acute care markets. PointClickCare offers electronic health records and care coordination and workflow software solutions for nursing homes and senior living facilities.
Electronic health records used in hospitals do not work in the nursing home setting. Patients in nursing homes have different clinical needs than patients in hospitals. Billing codes are also different in these settings.
PointClickCare has developed custom-priced enterprise software that helps nursing homes manage their operations and meet the requirements of strict government compliance reporting.
Smart Medical Devices and Digital Treatments
With respect to technology and devices, the line between these two types of products is being blurred, as technology and devices are incorporated into prescribed treatments and continuous monitoring devices.
1. Click Therapeutics
Click Therapeutics is a prescription digital therapeutics developer. With a workforce of about 70 people, they create software programs that are installed on patient-facing devices and that doctors use to prescribe treatment for patients who suffer from certain medical conditions.
The government regulates this area. Prescriptive software is regulated as a medical treatment, and therefore all product pricing and reimbursement by insurance companies is based on the particular product and the results of its clinical trials.
For a software company to receive reimbursement for their digital therapeutic product from insurance companies, it must demonstrate the efficacy of its product in treating the medical condition.
2. Formation Bio
Formation Bio is a drug development accelerator through AI. Formation Bio is staffed with approximately 150 employees.
Unlike leading health tech companies that simply provide software services, Formation Bio is focused on acquiring or buying clinical stage drug assets and utilizing Formation Bio's AI technology landscape to execute clinical trials quicker and obtain clinical data more efficiently than traditional methodologies. Formation Bio has established many inter-company collaborative agreements and commercial partnerships with biotechnology companies to accomplish this objective of shortening the drug development process by several years.
3. Oura
Oura's health technologies bridge the gap between consumer-based technology and health technology. Oura produces a wearable ring that measures sleep, heart rate, and numerous physiological data points.
Oura sells rings directly to consumers but also serves as a supplier of rings to research institutions, corporations, and health programs. The pricing aspect of their model consists of an upfront cost for hardware, and the other part of the pricing structure is a recurring, subscription-based fee for their software and service. This pricing model enables them to generate recurring streams of revenue and also support their growth in the areas of clinical trials and tracking population-based health outcomes.
4. Neuralink
Neuralink is the epitome of how ahead of the curve health tech is today, as their focus is solely on brain-computer interface technology that will directly connect neural signals to external devices.
While currently they are only in the research and clinical trial phase, no public pricing is available. Their business model relies on the support of private investors who are focused on long-term medical breakthroughs in high-risk medical research in order to help restore mobility and the ability to communicate for severely disabled and immobile people.
How Buyers Choose the Right Software
Funding rounds are not a viable means for assessing software vendors. Healthcare buyers will assess vendors against very specific criteria.
To start, there is the workflow and integration fit, as if the physician has to open up an entirely different window, separate from the primary clinical system, for the new predictive analytics tool, then it has little use. Ensuring proper integration is the only way to drive adoption of any such product. If a product cannot be integrated easily and securely via established data standards, then it will immediately fail.
Secondly, there is the evidence and regulatory standing; the market is much divided between unregulated wellness and well-being tools and cleared medical software. For any claims made as related to the improvement of the ability to provide quality patient care, the product must be backed up by clinical trial evidence, peer-reviewed articles, and audited financial results.
Finally, there is the buyer and proof of value. The individual who will pay for this product needs to be very clearly identified; e.g., do the finance directing officers at the hospitals purchase this product to aid in decreasing their administrative costs?
Or does the insurance company buy it to help reduce their readmission rates? The sales cycle is extremely complex, so there must be extreme clarity as to whether the product will reduce the overall hospital cost, increase the amount of revenue generated, or expand patient access.
The Final Rule for Implementing New Systems
Stop reviewing vendors solely based on their public relations strategies and demand to see their most up-to-date integration timelines since their last successful integrations.
If a platform cannot demonstrate immediate connectivity and tangible clinical and financial benefits within a maximum of six months from the time an order is placed, then walk away.